Does being a millionaire seem like a far-fetched dream? What does a typical millionaire actually look like? The truth is, being one is actually more achievable than you might imagine.
There is a test done by Stanford University once, called the marshmallow test. The test is one of the most accurate indicators to predict future success in a child. Basically, the test teaches the children to delay their gratification and they will receive a far greater reward. That is essentially the same and most important attribute that we need to succeed in becoming a millionaire.
Let’s us just take a short example of a person who started working at the age of 22. She will start her career with a salary of $2,000 a month and able to save able 20% of her salary every year. To make it more realistic, we assume she will be able to get an increment on her salary of 3% a year until she topped her salary at $5,000 a month. If she is able to invest that savings and compound it at a 10% return a year, she will end up with more than $4.5 million by the time she retires at the age of 65.
|Age||Wages||Savings||10% Return||6% Return|
|22||$ 24,000.00||$ 4,800.00||$ 5,280.00||$ 5,596.80|
|23||$ 24,720.00||$ 4,944.00||$ 11,246.40||$ 11,173.25|
|24||$ 25,461.60||$ 5,092.32||$ 17,972.59||$ 17,241.50|
|63||$ 60,000.00||$ 12,000.00||$ 3,837,325.42||$ 1,351,154.96|
|64||$ 60,000.00||$ 12,000.00||$ 4,234,257.96||$ 1,444,944.25|
|65||$ 60,000.00||$ 12,000.00||$ 4,670,883.76||$ 1,544,360.91|
More importantly, even if she just earns 6% years on her savings every year, she will still end up with $1.5 million by her retirement age. However, that is the easy part. The hard part remains; will we have the self-control to stop ourselves of spending our savings along the way?
The next time you choose being saving and spending, your decision might have a much greater impact than you might realize. Happy Investing.
Join us on Facebook for more exciting updates and discussion about value investing.Submit your email address for important market updates and FREE case studies![contact-form-7 404 "Not Found"]We will only provide you with information relevant to value investing. You can unsubscribe at any time. Your contact details will be safeguardedThe information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Stanley Lim’s personal capacity and do not in any way represent those of his employer and other related entities. Stanley Lim do not own shares in any of the companies mentioned above.